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tv   Bloomberg Markets  Bloomberg  November 23, 2021 1:00pm-2:01pm EST

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>> it's 1:00 p.m. in nshg, 2:00 a.m. in hong kong. welcome to "bloomberg markets." here are the top stories we're following for you around the world. oil climbing by the most in a few weeks. even after a landmark plan from countries to tap oil reserves. kailey: we discuss a move that was aimed at easing prices at the pump. bitcoin is up today but it could be losing some of the shine as the fed looks to bite inflation. we discuss the future of the cryptocurrency with sue ennis. and with executives reporting rising retail theft. we'll break down the third quarter results in our stock of the hour. let's first, though, take a quick check of the broader markets. it's a down day for equities even if they are off session lows. most importantly it's a down day for big tech. the nasdaq 100 down 1.3% after losing yesterday.
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a second day of losses. to that point, the 10-year yield is about four basis points. 1.66. we're about to get a seven-year auction so we'll break down the results for you in a couple of minutes. this is the market pricing in a more hawkish. the dollar is the strongest going all the way back to september this year. neither a stronger dollar nor the release of reserves from many countries's strategic oil reserve. crude up $78.76 a barrel. a, maybe the release of reserves was priced in because that was telegraphed. opec-plus could be coming in to counteract the reserve releases. and the story is about the turkish lira. it was weaker by 15% against the u.s. dollar. now weaker by 12%. 12.7%. erdogan is pushing for the price
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to be lower. even in the face of 20% inflation in turkey. that currency is at a record low. let's get back to the inflation story in the u.s. the move by the u.s. and other countries to release oil reserves is part of an effort to help fight inflation around the world and, of course, at the pump. now, president biden will be speaking about the economy at the top of the next hour. and ahead of his comments, let's bring in julia coronado, president and founder of macro policy perspectives. so julia, obviously, the president has a bit of an optics problem here when it comes to inflation. is it actually as bad as public perception thinks it is? julia: well, it's definitely not stagflation. the reason we're seeing high inflation is the reflection of several factors. one, that the pandemic brought havoc on global supply chains. ports and manufacturing operations that re-ak sal rated during the delta variant, that
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caused some bottle next. and the global energy, china, some of the pipeline issues in europe have caused energy prices to spike. and three, the recovery is just really, really strong. so that's the element the fed wants to calibrate, too. right now all three are contributing to a big spike in inflation pressures. yeah, it's a tricky issue. but the fact that the recovery is so strong and was supported by such strong policy, both fiscal and monetary, is a good thing. we're seeing a rapid labor market recovery. we're seeing strong profits. so in many ways, the recovery is going fantastically well. but it does come with this disruption and a burst of -- chair powell used the word, a burst of inflation, that's creating some optimist problems with the president. kailey: and the timeline with which they should do so.
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you now have a am in of officials talking about an accelerated pace of tapering in the market that's pulled forward the hike -- the first hike to june of next year. do you think that has been overdone or is that realistic? julia: only time will tell. on the tapering, i don't think that's probably not in the cards for december. to recalibrate, you know, the meeting after he just announced the paper seems a bit of a lurch. i think they'll leave the door open in december, maybe in january if things will continue to run strong they'll consider it and it was discussed. you know, pricing and rate hikes in the middle of next year isn't crazy given how strong the recovery has been. only time will tell how some of these frictions sell. how much does the relaxation of the chip shortage, the increase of chip availability, how much does that contribute to an easing in auto prices which has been a huge component of the core inflation spike?
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how much labor supply comes back to the labor market? you know, these are sort of the issues that will help drive the inflation dynamic. the fed knows how to tighten policy. so it doesn't need to panic. i think indeed for global markets and the global economy, which is far more uneven and fragile, you know, lurches by the fed wouldn't be particularly helpful. so i suspect a methodical recalibration. yes, they'll acknowledge the recovery is going well. they may have to tighten a little bit early. the dot plot might go up a little bit. but i still think they're going to keep that steady hand that meeting by meeting, data dependent methodical calibration of policy rather than, you know, meeting some of these proposals for a more accelerated lurch in policy. kailey: well, a lot of what you were just talking about there are supply-side driven inflationary forces, right? something that monetary policy doesn't necessarily fix.
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so if the fed does indeed tighten earlier, does it not run the risk of policy ending up too tight down the line when those supply side issues ease? julia: yeah. one, the supply chain issues are self-correcting. the auto workers are working day and night to get the chips and get it up and running. the fed doesn't need to do anything about that. in fact, it will take time for those interest rate hikes to crimp demand. exactly the timing could be very unproductive. counterproductive. the other factor is the saving fiscal support. we have been riding an epic wave of historic amount of fiscal support. there's still lots of, you know, gas in the tank, if you will, in terms of, you know, excess savings and healthy household balance sheets. but nonetheless, the dynamic, the contribution, the fiscal impulse into growth is going to fade over 2022. we're going to settle back down
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to a more organic pace of growth. if the fed lurches to tighter policy just as that fiscal policy is baiting and those supply chain issues are resolving, that could be a complete miscalibration. that's the reason for the fed to still, you know, keep a steady hand. it's going to be hard. these inflation numbers are high. you know, there's a lot of pressure. there's a lot of bullying by, you know, other -- outside economists claiming the fed is behind the curve. you know, i think if you look at the broader dynamic of the economy and the recovery, it's going very well. profits are high and wages are high. and growth is high. and hiring is robust. so those are all huge victories for policy and the fed can take comfort that, you know, it's sort of -- tough choices but against a strong backdrop. kailey: a little bit of comfort for a fed that's probably
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growing more uncomfortable by the day. hold that thought for a second. we are getting the results from the seven-year auction. we have been looking at the numbers. how is the takedown? >> yeah, kailey, let's get back to the headlines. we see the seven-year auction of 1.588%. so actually, we get a stronger demand than expected. ritika: this is we traded through 1.1 basis points. we were expecting we would tail. i'll bring you some of the other numbers we have. 2.42. so stronger than expect. the average was about 2.31. the past is six auctions. that is an indication of your foreign demand. that's coming in at 59.3 versus the average of 60.5. a lot of the focus, kailey, was on the seven-year treasury auction as we got the weaker tail on the two-year and
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five-year. today was a story about that cheapening going into the auction. what we've seen is that dip buying has really come into play. a lot of this on, you know, what we were thinking with the hawkish fed we have seen. kailey: a lot of short end in the belly of the curve. ritika, thank you. we see the seven-year up on the day, 1.57%. julia, i want to get back to you because we have a number of catalysts that could be coming for this bond market tomorrow. a lot of economic data. maybe the single largest day of economic data that i can remember. what i think is going to be particularly interesting is p.c.e. of course, that's what the fed watches. also, personal consumption and income and spending. how do you think those dynamics are at work with this u.s. consumer that has a lot of savings but also is confronted with higher inflation and not necessarily rate -- wage raises that goes along with that? julia: well, what we've seen -- and this is oftentimes the case, even though consumer sentiment
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has taken a hit recently, probably tied to both the delta variant and the higher gas prices. spending has sort of powered along very well. so not just nominal because of higher prices but real consumer spending has been very solid. so that should be reflected in the reports tomorrow. also, the high inflation, we've already seen c.p.i. we know the p.c.e. is going to pick up as well. the thing that we will get in the report tomorrow that we haven't yet seen is the services side of spending. so, again, that's a baton passing that we're wondering how much will consumers pull back on goods and spend more on services? we've seen services spending take a hit during the delta variant. less travel. less entertainment spending. so that's our first look at that for october. so we'll be taking a look at the composition of spending. i think overall the picture is the consumers are doing great. and they're not particularly
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pulling back on their activity ahead of the holidays because of prices. and in fact, maybe even some of the shortages, you know, looking at some of the retailers announcements aren't as bad as the headlines suggest. the stores, target, walmart, the shelves are stocked. so consumers are willing and able to spend, it seems. that's what i expect the data to show tomorrow. kailey: that's looking ahead to tomorrow. i want to look backwards to yesterday. the reinstatement of chair powell. and there's still two seats open. one of them is the supervision world. do you see the biden administration heading toward the left with the seats remaining? julia: well, it's going to really be dependent on the confirmation process and the realities and the practicalities of the confirmation process. so we haven't heard a lot of names of candidates circulates
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as vooigs chair of supervision -- vise chair of supervision role. definitely, the posture of the candidate will be more activist on the regulatory front. there's a lot of issues in terms of working climate change into stress test and supervision standards. digital currency issues. both regulation and central bank digital currency possibilities. and, you know, i think the plate is full for this person. shifting back to a tighter regulatory stance from the prior administration. but, again, i think it's going to be somebody that's probably well steeped, very experienced in this area. and somebody that's confirmable by the senate. so we'll see what names they come up with. they also -- president biden also promised he'll use this
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next round of openings, both the vice chair of supervision and the two governor slots to further diversify the federal reserve board. and that is something that he has been very front and center in his appointments so we'll look for that as well. kailey: all right. thank you so much for that today. that's julia coronado, president and founder of macropolicy perspectives. i want to turn to something that caught my eyes today, surprise, inflation. it's catching up to the lowest of price points. dollar tree say it will sell a majority of the products more than a dollar. boosting the standard to $1.25 by the end of april. the company explains the decision by pointing to the inflationary environment and saying the price boost will help it mitigate high costs including freight, distribution as well as wage increases. it almost feels dishonest now. the c.e.o. of astrazeneca is
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searching for a rise in covid cases. this is bloomberg. ♪
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kailey: this is "bloomberg markets." well, there's growing concern when it comes to the covid surge in europe. astro zenica c.e.o.'s said covid will be like the flu. and the plan for increasing vaccination rates and keeping prices low. take a listen. >> it's likely this pandemic would be an endemic over time. it's more or less endemic in some areas of the world which will be like the flu. it will come back on a regular basis and people may have to be
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vaccinated. pascal: the question is, do you need to be vaccinated every year, every two years, we don't know that. it will depend on the ability of the vaccines. again, that's why we need more data and follow-up. right now we are in the urgency of the moment which is to stop this pandemic from spreading, we also have to think about how we're going to live with this virus being endemic like the flu is? therefore, how often do we vaccinate people? only time and data will tell us that. >> is that why you've recently changed this for-profit model and would it have been wiser to wait for the w.h.o. to call it an endemic instead of a pandemic? pascal: well, you have to think about the fact that the for-profit approach which, by the way, is a reminder will be a modest profit applies to new
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orders. the new orders will be mostly next year. so we are really talking about next year. next year hopefully we will have as a society even more progress in terms of vaccinating people. so, you know, that's the environment that you have to consider this decision. number one. number two, our price would always be quite reasonable. so it go from no profit to some countries to some profits for others. but we will always look for modest profitability because at the end of the day our company is about cancer. it's about caddio vascular, rare diseases. we never look to make enormous profits out of this vaccine. kailey: that was pascal soriot, astrazeneca's c.e.o. still ahead, bitcoin is high
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today. we'll hear from hut 8 mining sue ennis's next. this is bloomberg. ♪ berg. ♪
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>> this has been a great trade this year because inflation was surging and because the fed was not doing anything about it. now the dollar is moving higher and the fed is going to do something about inflation next year, bitcoin has lost a little bit of its shine. kailey: that was anastasia amoroso discussing bitcoin's function ahead of inflation. and sue ennis joining us. cryptocurrency minor hut 8 is. when we talk about this inflationary environment and we expect president biden to speak about inflation in just about 40
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minutes' time or so, how does bitcoin work as it is a hedge? is it an inflationary hedge? sue: it's an inflationary hedge because it's built to be in the asset itself. i think there definitely has been some mounting concern that inflationary pressures will cause a drop in demand for risk assets. unfortunately, right now, that does somewhat include bitcoin because traditionally there has been a reasonable amount of refrj that has been used, for example, in leverage long positions in bitcoin. we actually, though, have been seeing a reduction in leverage being used towards long positions in the past month or so which is a good thing in terms of tempering some of the volatility that has with this asset class. certainly, you can look at it, bitcoin by its design is naturally a hedge against inflation. and we are certainly very excited to see, you know, how
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this asset continues to mature as we sort of where things land in terms of when interest rates ultimately start to rise. kailey: let's talk about bitcoin's relationship to other assets as well. when you look at the equity market, it's actually very, very tightly correlated. we have a chart on the bloomberg terminal that shows it as a ratio of .33. basically, as the stock market goes bitcoin goes or vice versa. do you think that bitcoin is really just another risk asset that will trade in tandem with risk by and large? sue: so no. for the time being, i mean, it has certainly been trading alongside like that. but we do think ultimately as adoption of this asset class continues to mature, i mean, we've certainly seen institutions, you know, different governments are also looking into the sprays well. -- space as well. as adoption continues to accelerate, we do think that
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there will -- it will be a lot less correlated, particularly as leverage continues to leave the system. i mean, if we even look at -- so, for example, the credit market is $123 trillion of the credit market, and about $15 trillion of that is negative yield in debt right now. so that is ultimately not an asset on your balance sheet that's a liability. so we think as -- if bitcoin were to capture even 2% to 3% of that market, that would be incredibly accredited to the price and we do think there will be a decoupling from how it, you know, sort of trades right now. once we see where rates ultimately go. kailey: so sue, obviously, volatility is an issue not just with bitcoin but cryptocurrency. mining, in particular, is the environmental concern. how are you addressing that at hut 8? sue: so at hut 8, we not only take a top-down approach to considering the environment as
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not only a shareholder but also a stakeholder in our business but also a bottom-up. so going fully carbon neutral is certainly on our -- is something we're working towards. we also look at how are -- kailey: is there a target date for that? sue: not yet we've announced to the market but we're evaluating right now and we'll update you guys shortly on that. we look at little things from a bottom-up approach to our business. so, for example, we have electrified all of our vehicles on the ground instead of using gas-powered, we now have electric vehicles. we've partnered with a company to collect the sigh row foam and -- styrofoam that wraps around the miners. and other packaging. and we have that styrofoam and it resells to the market instead of going to the landfill. looking at how to reduce our landfill footprint is what we're doing with the environment in
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mind. we also have a third site going up in north bay, ontario, and a portion of the energy derived from that will be steam-powered. and also, the grids that were connected to in alberta, a portion of the energy of those grids is solar and wind. it's up to 35%. so those are some of the things hut 8 is looking to do, again, to consider the environment as a shareholder in this business. ultimately -- mining is bad for the environment. kailey: sue, we have to unfortunately leave it there. that's sue ennis of hut 8 mining. we take a deeper look at why best buy shares are plummeting the most since before the pandemic. that's our stock of the hour and it's coming up next. this is bloomberg. ♪ this is bloomberg. ♪
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>> let's get to the first word news this afternoon. southern california's edison
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utility company power 100,000 homes and companies to prevent live wires from falling. los angeles and orange county are two to have their power to shut off if winds is too discuss. last year they cut power on thanksgiving day. ritika: a win for the biden administration which wants greater semi conductor capacity on u.s. soil. bloomberg learned that it be factor from samsung's manufacturing hub in austin. samsung is hoping to win more american clients and win over taiwan's manufacturing. and israel started giving the covid-19 vaccine from children 5-11. health ministry statistics show a large share of the new infections are in children and teenagers. children ages 5-11 make up nearly half of active cases. and the masks are coming off at
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some u.s. universities just as students begin to travel for the holidays and winter threatens a fresh surge of covid. indoor mask mandates at gone at louisiana state except for on campus buses. mask rules may be lifted in perdue university, in indiana, come february. the university of tennessee system and its requirement last week. global news 24 hours a day. quick take. powered by more than 2,700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. ♪ amanda: i am amanda and welcome to bloomberg markets. >> these are the news we're following around the world --
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president biden releases 50 billion barrels. we discuss if the move could see a backlash. and of course, energy prices aren't the only prices soaring. we look at food as commodity rallies causing thanksgiving dinners to be more expensive this year. and not at its best. we take a deeper look at why best buy shares are plummeting as the country takes a hit. so best buy shares are down and the broader equity markets is down. the loss is not quite as steep as here in the u.s. of course, losses here in the u.s. are compounded by the fact it is big tech being hit the hardest. nasdaq 100 down. yields 165 on the 10-year treasury yield, reshaping and repricing of fed hike expectations. now we see june of this year. that's causing a lot of action on the bond market. energy and crude up 2.5% on
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w.t.i. maybe it was priced in the reserve release in the u.s. or other countries or maybe they're betting on opec + doing something about it. best buy shares are under pressure after the electronic retailer said increased robbery of organized thieves. ry keita -- >> a lot of retailers are coming up with really great numbers. saying the consumer is still strong. their holiday inventory is strong. you see best buy taking it on the chin there and it comes down to margin. those year over year margins are down 22.2% a year ago to 22.6%. the margins are expected to drop next quarter as well at the holiday season when you have that excess volume, those excess sells coming in and really recovering in the first quarter,
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excuse me, of 2022. what's pressuring these margins? what's really behind it? you said it in your intro, it's about theft here. they talk about promotional activity, product damage and returns from 2020 when that retail buying was really growing in a pretty big way. kailey: let's talk more about the theft. you know, regardless of the fundamentals, that's what's caught my eye. that's not something unlike supply chains that a company can do much about. what does best buy say here? how seriously should we take that? >> we're hearing about freight costs, we're hearing about supply chain issues. we are not hearing about theft and organized crime. think about it. we're in this environment where inflationary prices are rising. there is this added motive to steal, for lack of a better term. krita: in a survey retailers, do they see change in crime? 31% said they saw a significant increase. 44% said they saw a slight
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increase. this is something to watch. kailey: all right, thanks so much. appreciate that. coming up, as our dinner plates get pricier, we'll talk about what's behind the movement of commodity prices and how long food inflation might last. stay with us.
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amanda: this is amanda lang. we're watching a lot of high price commodities, some that come off record levels. not for wheat, though. soggy fields in australia continue to stoke some global
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supply concerns. it's the latest example, of course, of high prices. this one is really hanging on. rain in australia is one culprit. the massive floods in b.c. is another factor here. extreme weather is the underpinning theme, though? . kailey: climate change, also, is a serious issue for a lot of farmers and agriculture producers out there. let's get more on this and talk with angie setzer. founder and partner providing consulting for the agriculture space. is it so much the supply chain, logistics that they are dealing with or in the agriculture space it has a lot more to do with climate and weather-related events? angie: a combination of both. it's important to understand what's taking in the agriculture
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space and futures market. not only are we dealing with certain supply chain issues or disruptions in supply, you know, we've seen russia kind of increase their export taxes as of late. they're limiting their supply in the market structure. we've got these issues with whether or not we're going to have quality wheat out of australia. we've seen limitations of wheat production out of western canada and the northern portion of the u.s. plains. and so really when it comes down to it, you say that everything has -- is kind of come together as this perfect storm to create these record high european milling wheat prices and record high prices or close to record high prices here in the u.s. amanda: of course, angie, where we do get the man-made problems coming in, the cure for a high commodity price is the high commodity price. when you get these bottle next, whether it's the port of vancouver that can't ship because of our infrastructure
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breakdown thanks to extreme flooding or other supply chain bottle next, that is -- bottle necks, that is, of course, a pandemic-related issue. will that smooth itself out? are you looking beyond that to next year when those are less of a factor? angie: i think we'll see -- we really have logistical concerns we have to work through. obviously, canadian wheat exports will be down significantly this year versus a normal year because of the production losses we have already seen. so maybe that's a tiny blessing on that side. reality is, unfortunately, the fall weather wasn't the greatest either in some areas. we're seeing wheat conditions a little less than what we'd like to see typically this time of the year. i will say fall conditions for winter wheat means very little to final production. it's definitely not something we want to see a reduction in perspective planting acres. also took place because of a wetter fall than what we'd like to see. this really -- i don't think we're going to continue to set
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new all-time record highs for several months in a row. but i definitely think this market has some room to run just as we try to wrap our mind around what's exactly going to take place and look at the likelihood it could take us up to two years to really get back to where we're back to building global wheat stocks. that's been our biggest issue. we've had several years in a row where low prices have cured low prices. we just had this sort of boom rang or rocket ship type of effect where we've seen production lower year over year because there really wasn't any sort of incentive from a cost standpoint. we saw kansas city wheat trade below $4 for quite sometime. we saw production cuts there. now it's going to take us at least a year if not two to really get back to where we feel comfortable with what's these global supplies are. and we also have this kind of 800-pound gorilla in the room in the sense we don't know what chinese demand will look like. china liquid ated a large
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amount -- liquidated a large amount of their wheat reserves, in their corn meats, when it came to feed. we don't know what china will come in big time to buy. they have been quietly buying french wheat which is part of the reason why you saw those european values increase. we just had this issue in australia exacerbate that entirely. we're sitting here with the likelihood, wheat doesn't need to continue to set these record highs that we're seeing. it definitely is going to stay supported for quite sometime to kind of incentivize that production. we're going to need to do that. and really get people thinking about whether or not they need, you know, whatever that extra wheat may be or what kind of demand structure they're going to be looking at as we move ahead. kailey: of course, we have to think of the whole food chain here, angie, when we see these food stock commodities.
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lord help us meat eaters when we look at the price of meat. amanda: can you look at the whole cross of spectrum of commodities and see how that plays out? angie: wheat doesn't become a feed product to animals unless corn gets too high or too scarce. that will be the biggest sector we can cut demand in as long as we see a strong production, especially out of south america when it comes to soybean and corn in the months ahead. we can limit that demand. some of the other factors you're seeing at play is obviously this overall higher value when you look at soybeans and you look at corn. when you look at byproducts. the competition is there whether it's ethanol or exports for corn, you know, and sews these feed -- and so these feeders are finding themselves in stickier situations. when it comes down to it, throughout the world, everyone thinks if your cost -- if your
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input cost goes up you charge more. it's not necessarily the case for the farmer. amanda: to that point, you have to pass the cost onto the consumer. kailey: the consumer has to tolerate those price hikes and buy your product. is there a sense the consumer is tolerant of food related hikes? angie: the farmers are the ones to sell wholesale. you know, adage, pay wholesale and pay retail. it's more the processor that has the ability to pass that price onto the consumer. so you will see the processor do it. yeah, the costs are high. the cost of producing that are higher. the farmer markets are getting squeezed. cost of employment, cost of all of these other things and consolidation throughout the meat industry is what we're
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seeing when we see higher prices at the plate. meat demand or food demand, you know, we are seeing some of the extra money work its way into paychecks. you know, whether that's the child tax credit or additional stimulus. some of those things. and so far the consumer is kind of taking it with a grain of salt. but i think we'll run into a situation relatively quickly if things don't calm down where if they start to address what it is they're putting in their grocery carts every week and maybe start to make some market changes in what their demand looks like. kailey: heading into a much more expensive holiday dinner season. i want to talk about a different industry. that's the financial industry and how different it looks in the u.s. and canada when it comes to return to office. because here in new york, amanda, i've been seeing people down on wall street for months now it's been really busy but it's just starting to trickle back to normal out there in
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toronto. amanda: yeah. it looks as though january is the date, kailey, when we'll see more normal capacity. one big difference, and i think that's probably true on both sides of the border, is that there will be more choice. and that people that want to work at home will at least have a slightly more of an option doing it. one thing that's the same is the commute. people are nervous about the subway system as some are in toronto, and i know they will be, like new york, it will give them still some optionality. it's a sign we're getting slightly back to normal. kailey: or taking the subway here in new york. traffic seems like it's always horrendous these days. [laughter] amanda: isn't that the truth? and infrastructure is the worse. coming up, president biden is getting ready to address the nation at 2:00 p.m. with his decision to release oil from the strategic reserves. we're going to get insight from the director of search. that's next.
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amanda: this is markets. -- this is "bloomberg markets." president biden is set to speak in a few minutes. one of the topics we expect he'll touch on is inflation and oil. the u.s. will -- it has been announced -- release 50 billion barrels from the strategic reserves. that's in a coordinated effort announced simultaneously with countries like china, japan, and india. kailey, we see the price of oil moving higher today potentially because there is a theory that opec will respond by raising its own output. or that it's so little oil that nobody cares. kailey: it's good point. how much was this priced into the oil markets given this move toward reserve releases has been well telegraphed over recent
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days and weeks? oil moving higher today. of course, we await any action or reaction from opec+. amanda: let's bring in amrita sen. on the one hand, we could get reaction from opec. another this is priced in. what's your take on the release of reserves and relevance of the supply side? amrita: i think you hit -- i mean, you kind of touched on both points. the first one, i think the more important one, is the volume that you're talking about, 65 million barrels without china. it's about half the number that was being touted around by various analysts who were talking about 100 to 120. we've been of the view, it will repackage what they've already been doing, asia, china, india, korea, they've been releasing the reserve throughout the year.
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this is a repackaging that were happening anyways, such as china. china has not come out to announce anything in any case. we understand they want to separate the announcement out. they want to be led by the u.s. it might be weeks. they might not announce it. right now it's 65-ish million barrels. these are all loans. they need to be repaid back. most of this basically, 2/3. i think that's where the market is reacting to. essentially, you're releasing it today but you have to repay all of it or rebuild pretty much most of this back from next year onward. it makes next year's markets bullish. kailey: we tapped the reserves here before in the u.s. but it was in times of geopolitical conflict or hurricane katrina, for example. this isn't about the lack of capacity or the inability to produce or attain oil. it's -- we could pump more and we're not. in the case -- that's the case here in the u.s. and the case for opec+.
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what will it take for the pumping to ramp up? amrita: look, opec+ are sticking to their plan which is bringing back 400,000 barrels per day every single month through september of next year. they are worried about winter, covid cases, potential mobility restrictions in europe, china. demand isn't back to 2019 levels yet. i think opec+ are being cautious but correctly cautious in bringing back production gradually. they are not saying they are not bringing it back. u.s., again, the shareholders are getting u.s. producers to actually return money for them having making a loss for 10 years. that's a different story altogether. i think this is, as you say, 100% a political move. this isn't a market where there is shortage. yes, inventories are extremely low and spare capacity will get very, very low next year. but structurally, this is a market where there's underinvestment. releasing an s.p.r. won't be the
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solution. this is about the biden administration being blamed for inflation. amanda: i'm reading here on the bloomberg terminal that the release will be of sour crude that is not what refiners are looking for right now, amrita. perhaps the timing of this is also not ideal when it comes to the type of oil being unleashed. amrita: oh, absolutely. i mean, the sour crude headline, you could see the time spread move up so the curbs went back. this market is in need of sweet crude. that is because natural gas prices are high. when it's high refiners prefer lighter sweeter crude. it reduces the cost of processing them. relieving so much, all of that 50 million barrels coming out of sour crude will make no sense to benchmark. i think, again, shows you how political a move this is rather than being driven by fundamentals. kailey: speaking of politics, there's internal politics of opec+ as well because we're talking about a cartel of
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different countries who all have maybe in some sense some competing interests. we've seen some friction when it comes to market share. do you think there could be some individual players who take less well to these reserve release than others and want to take action? amrita: i mean, look, as a group, i think they are very, very united. again, so far they've been very clear in saying we'll continue with the 400,000 barrels for the increase. we still think they'll do that for december. but the likelihood that should we pause, should we not increase given so many barrels are coming out into one demand, of course, pause is going to be on the table. not saying that's the case but you have to think they will at least talk about that because if they're looking at the balances, the s.p.r. can actually lead to surpluses in q-1. amanda: amrita, what's your current expectation of the price of oil in a year's time? amrita: we've been saying that
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prices will average $85 for the last three years for 2022. we had that for a long time driven by underinvestment. just generally the focus in energy transition. again, the irony of the biden administration wanting to move towards a greener energy would yet subsidizing oil for the -- at the pump for consumers. how will consumers really move away? we'll leave that to one side. this transition story is really, really getting companies completely away from investing in oil and gas, to be honest, and that just means we have huge underinvestment. it means we'll continue to be in a high price environment. amanda: thank you. amrita sen, energy aspects. that does it for us. we'll bring you the president's remarks when they come. for kailey leinz, i'm amanda lang. this is bloomberg. ♪
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>> first word news -- china has issued a plan to ensure food
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production and supply this -- threatens to bring extreme weather this winter and spring, including the lunar new year holiday and the winter olympics in february. the agriculture set -- secretary says drought in some regions are likely to occur. and in response, the country is doubling down on its strict covid zero policy, despite rising costs to its people and economy. authorities are taking more extreme measures to contain the delta variant. the state media is pushing the line that china is better off closed. president biden is reportedly considering whether to send military advisers to the ukraine. the u.s. is also looking to send more weapons to ukraine, including antiaircraft missiles. russian forces posed the threat of invasion. the kremlin denies any aggressive intention.


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